PM takes stock of oil firms' losses on fuel sales

Prime Minister Manmohan Singh today called a meeting of the public sector oil companies to review their financial health in the backdrop of rising under-recoveries. However, no decision was taken at the meeting, according to a petroleum ministry official who was present.

The total under-recoveries of the state-run oil marketing companies (OMCs) — Indian Oil, Bharat Petroleum and Hindustan Petroleum — from sale of liquefied petroleum gas (LPG) and kerosene at below-cost rates for the nine-month period ended December 2009, are in the range of Rs 21,000 crore. “At current estimates, this figure will go up to Rs 30,000 crore by March,” Petroleum Secretary R S Pandey had said on Tuesday.

Last month, Minister for Petroleum and Natural Gas Murli Deora had said his ministry had requested the finance ministry for issue of oil bonds worth Rs 20,871 crore. This was for compensating the OMCs for their under-recoveries on kerosene and domestic LPG for the first three quarters of the current financial year.

“But, we are yet to receive the same. The delay in compensation through bonds is reflecting on their (OMCs’) financial performance,” Deora had said last month.

The finance ministry has still not made a commitment for compensation.

The OMCs currently incur an under-recovery of Rs 3 a litre on petrol, Rs 2 a litre on diesel, Rs 17.23 a litre on kerosene and Rs 299 on each cylinder of LPG. For the second quarter of the current year, both Bharat Petroleum and Hindustan Petroleum reported losses of Rs 159 crore and Rs 137 crore, respectively. However, Indian Oil managed a profit of Rs 284 crore.

“The OMCs are the backbone of the country’s energy security and, hence, their financial health is a cause of concern for us,” Deora said.

For the current year, the under-recoveries on auto fuels are being fully compensated in the form of discounts from upstream companies like ONGC, OIL and GAIL. Under-recoveries on sales of kerosene and LPG are supposed to be compensated by the government, either through bonds or in cash.

Deora to meet FM today
Petroleum minister Murli Deora is scheduled to meet Finance Minister Pranab Mukerjee on Thursday to discuss the status of compensation to the OMCs for the losses incurred on subsidised sale of LPG cylinders and kerosene oil.